the prescription was management assistance

George Schultz and Allyn Mellits, two young men in Bowie, Md., who had started a part-time business selling and servicing fire extinguishers, were in trouble.

They had borrowed $5,000 from the local bank to establish an inventory, but sales did not move, principally because many competitors were dividing the market and an economy line was was undercutting their products.

Then Mellits saw a TV public service "spot" about SCORE, the SBA's volunteer Service Corps of Retired Executives devoted to management assistance. A call to the SBA drew William J. Madison, with long previous experience in light industry.

He diagnosed the problem and did the following: (1) Suggested that the partners hire part-time help on a commission basis until the business volume warranted their own full time; (2) instructed them in pricing and costing and established a bookkeeping system; (3) advised them to incorporate for personal liability protection; (4) counseled them to obtain an exclusive dealership agreement for their territory; and (5) assisted them in developing a direct mail advertising campaign.

A year later, in 1970, Schultz & Mellits, Inc. had one partner full-time, had put on another employee full-time, and were hiring as many commission salesmen as they could find. Annual gross sales "before SCORE" were $6,000. Gross sales for the year ending after management assistance was received: $99,868.97.

year, including the first on SBA's technology utilization program. Films on financial management and credit and collection in retail stores went into production and will be available in 1971.

Technology Utilization

The Technology Utilization Division disseminated information on problem-solving techniques, using workshops and technical, professional and trade publications. It estimated that more than 6,000 small firms gained assistance. through the program. One company said it increased profits up to $10,000 as a result of procedural directions received for machining, while another firm realized additional sales up to $50,000 on a newly developed product. A recent cost-benefit study of this program showed a return of $8.3 for every Federal dollar invested.

Management Consultants

The responsibility for administering management contracts under section 406 of the Economic Opportunity Act of 1964, as amended, was assumed by the Office of Management Assistance in 1970.

Management contracts were awarded to 15 consulting firms to provide management and technical assistance to socially and economically deprived small businessmen, and to small businessmen located in urban areas of high concentration of unemployed or owned by low-income groups.

During the year, 326 companies received management assistance through this program at a cost of $1,750,000, with retail businesses receiving the majority of assistance.

In 1971, it is anticipated that the program will be directed more toward those firms receiving Government set-aside contracts, with the longrange objective of making them competitive and not solely dependent on Government contracts.

with a maximum of 6 percent per annum; makes certain disaster loans available without regard to the availability of private credit; authorizes SBA to make economic injury loans to small business concerns in connection with SBAdeclared disasters in addition to those disasters declared by the President and Secretary of Agriculture under existing low; and authorizes SBA loans to a nonagricultural enterprise located in a presidentially declared disaster which has been a major source of employment but is no longer in substantial operation.

Two new laws expressly amended the disaster section of the Small Business Act. The first, Public Law 91-596, the Occupational Safety and Health Act of 1970, levies new job safety requirements on employers. Section 28 amends section 7(b) of the Small Business Act to authorize SBA to make disaster-type loans to businesses required thereby to upgrade their premises for the safety of employees, where the businesses would suffer substantial economic injury without such assistance.

The second, Public Law 91-597, the Egg Products Inspection Act, sets health requirements to be met by producers of eggs and egg products. Section 25 amends section 7(b) to authorize SBA to make disaster-type loans to concerns which would otherwise suffer substantial economic injury as a result of meeting the requirements of this act, the Wholesome Meat Act of 1967, or the Wholesome Poultry Products Act.

Surety Bonds

Section 911 of the Housing and Urban Development Act of 1970, Public Law 91-609, authorizes SBA to guarantee up to 90 percent of the losses suffered by any surety as a result of the breach by a small business concern of the terms of a bid bond, payment bond, or performance bond on any contract up to $500,000 in amount. This proposal was initially included as title III of the Small Business Amendments of 1970 proposed by the agency early in 1970 but not enacted by the Congress.

Crime Insurance

Of particular interest to small business is title VI of the Housing and Urban Development Act of 1970, Public Law 91-609. This title authorizes the Secretary of Housing and Urban Development to make crime insurance available at affordable rates where it is not available through the normal insurance market or through a suitable State program. In this connection, it should be noted that establishment of a Federal crime insurance program follows completion and submission by SBA to the Congress in 1969 of the comprehensive study of the impact of crime on small business concerns required by the Small Business Protection Act of 1967, title III of Public Law 90-104.

Passed by the Senate in modified form but not acted on by the House of Representatives were SBA's proposed Small Business Amendments of 1970.

Probably the most substantial small business legislative proposal since the Small Business Investment Act of 1958, the bill would have implemented the March 1970 Report of the President's Task Force on Improving the Prospects of Small Business and the corresponding special Presidential message to the Congress.

As proposed, the bill's more important provisions would have authorized SBA to make small business loans in cooperation with nonlenders, such as pension funds; to extend loan guarantees without advance agency approval on each loan; to make limited interest subsidy grants to small business concerns receiving SBA loans through the cooperation of other lenders; and to strengthen its programs for providing business management assistance and related technical aid to socially or economically disadvantaged persons.

Major changes would have been made in the Small Business Investment Act of 1958 to provide for the organization of minority enterprise small business investment companies under State nonprofit statutes and their ownership, in whole or in part, by banks and other financial institutions; to make specific and strengthen SBA authority to guarantee loans to SBIC's; to authorize SBIC's to invest in unincorporated businesses; and to permit 100 percent SBIC guarantees of loans to small

concerns.

Strengthening SCORE

Also failing of enactment was a bill, substantially endorsed although not proposed by the Administration, which would have strengthened the SCORE (Service Corps of Retired Executives) and ACE (Active Corps of Executives) programs established by SBA to increase the availability of management counseling to small business concerns.

Directed largely at improving the conditions under which corps members work and establishing more equitable reimbursement arrangements for out-of-pocket expenses incurred by them in the course of such work, the bill would also have provided SBA with clear authority to pay the cost of disseminating information regarding the availability of SCORE and ACE to the small business community.

No congressional action was taken on an Administration draft bill, entitled the "Small Business Taxation Act of 1970," embodying a number of tax proposals, some recommended by the special Presidential Message on Improving the Prospects of Small Business.

provided a deduction equal to 20 percent of the gross income derived by corporations from obligations guaranteed by the Small Business Administration; (2) permitted business losses incurred by individuals or qualified small business corporations to be carried forward for 10 years as a deduction against income during those years; (3) liberalized the requirements for capital gain treatment of qualified stock options in the case of such qualified small business corporations; and (4) modified the definition of an electing small business corporation (subch. S corporation) to increase from 10 to 30 the permissible number of shareholders in such a corporation.

Interagency Advocacy

The SBA advocacy program was significantly strengthened on March 20, 1970, when the President issued Executive Order 11518 directing SBA to take appropriate action to insure the timely presentation to departments and agencies of the U.S. Government of matters materially affecting the well-being or competitive strength of small business.

To this end, the President authorized SBA to participate in investigations, hearings, and other proceedings pending before such departments and agencies and to submit evidence, briefs, and arguments in accordance with and to the extent permitted by the department's or agency's rules of practice and procedure.

This Executive order bestowed upon SBA's advocacy program the highest executive recognition in the Government and emphasized SBA's right and duty to participate in all Federal rulemaking and other proceedings affecting the small business community.

Among the more significant achievements of the program, as carried out by the Office of General Counsel, was intervention in a suit in the U.S. District Court in New York which resulted in reversing an order of the Interstate Commerce Commission permitting motor carriers to increase rates on shipments under 500 pounds. These are the shipments in which small concerns are vitally interested.

Another illustrative achievement of the program was opposition to the recommendation of the Tariff Commission to embargo the importation of low-fat chocolate crumb, a product otherwise unavailable to small milk-chocolate manufacturers. The final disposition of the Tariff Commission recommendation resulted in permitting importation of an amount equal to that imported in the fiscal year ending June 30, 1970.

Among other departments and agencies whose activities attracted the attention of SBA because of potential impact on small business were the Civil Aeronautics Board (proposed regulations for group air charters); Securities and Exchange Commission (proposed rule on sale of unregistered stock); Office of Emergency Preparedness (oil import quotas); Department of Housing and Urban Development (proposed contractor debarment regulations); and the Renegotiation Board (effect of Board regulations on small business).

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